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State moves ahead on gas line

Posted: Thursday, April 01, 2004

By Gov. Frank Murkowski

It is important for everyone to understand that, despite MidAmerican's decision not to invest in the natural gas pipeline project at this time, we are making significant progress toward the eventual commercialization of our gas resources.

My team, including top legal, economic and commercial experts, is working diligently on a framework under which a gas pipeline project can be built. MidAme-rican had something to contribute to that plan and we encouraged its contribution in every way we felt appropriate. The company sought to be the state's development partner for the development of the Alaska section of the gas pipeline and we provided MidAmerican with an opportunity to do just that.

Recognizing that under current U.S. and Canadian law, TransCanada and its subsidiary, Foothills Pipeline Co., hold an exclusive right to develop the gas pipeline to take gas from the North Slope through Canada to the Lower 48 states, the best way for MidAmerican to obtain the five-year "exclusive" it wanted to the Alaska portion of the project would have been to develop a joint work plan with TransCanada.

Once that was completed, TransCanada and the state would have consolidated the five-year exclusive Alaska right-of-way across federal and state lands in MidAmerican. We hoped that this would give it the security MidAmerican needed to move forward as the state's development partner.

But in the end MidAmerican wanted the state to agree to reject the stranded gas application the state had already accepted from the producers of the gas. I did not and still do not believe that the state can legally and morally go back on its promise to negotiate under the law in good faith with the producers.

What I did offer was a guarantee that the state would protect MidAmerican by not offering better economic terms to any other party. However, this was not good enough for the company.

Our offer, in the words of internationally renowned oil and gas consultant Pedro van Meurs, was one that "any sensible pipeline company would be very happy with." This is borne out by the fact that we

subsequently made the same offer to TransCanada, which is aggressively negotiating it with the state. TransCanada has also indicated an interest in working with the Alaska companies that had joined with

MidAmerican, including Alaska Native corporations.

We are not only making progress with TransCanada, but also with the Port Authority (formed under state law) to commercialize our gas through LNG exports from Valdez. We need to explore how a highway pipeline project to the Lower 48 states will work with and build on the progress of this initiative.

We also expect that another major pipeline company will be making an application to build the Alaska portion of the gas pipeline project in the very near future.

The bottom line is that, as I stated in my March 25 letter to MidAmerican, now is the time to work with all the interested companies and authorities to develop a project together.

This gives us the best chance of success. Limiting options by excluding participants at this stage is simply not in the state's best interest. We have too many options and opportunities to develop further at this point.

Clearly, the time for the natural gas pipeline is coming to fruition. As owners in common of their natural resources, the people of Alaska want their interests protected and their return maximized. Making sure that happens is the mission of this administration. We cannot make deals inconsistent with this mission.

Gov. Frank Murkowski is a Republican who was elected governor in 2002.